Global – SThree Q3 net fees increase 19% in constant currency as FY2022 trades ahead of expectations

September 20, 2022

Specialist international recruitment firm, SThree (STHR: LSE) today released a business update for the third quarter ended August 31, 2022. Group net commissions increased 19% year-on-year in constant currency ( CC) against a solid comparative period.

The group saw continued year-on-year growth in the three largest countries with Germany up 13%, the US up 9% and the Netherlands up 36% , in constant currency, which together represent 73% of the group’s net commissions. Key sectors also saw robust growth with technology up 25%, engineering up 25% and life sciences up 2% from the same quarter last year, at constant changes.

Net contractual fees increased by 21% per year while net permanent fees increased by 10%, at constant exchange rates.

SThree appointed a new CEO, Timo Lehne, in April 2022.

Timo Lehne, Chief Executive Officer, said: “Our group recorded another excellent quarter of growth, driven by successes in all key regions and STEM disciplines. Thanks to this strong performance, coupled with the visibility of contractor orders, we are again ahead of market expectations for the full year 2022.”

SThree’s current consensus on profit before tax is £71.2 million for FY22.

“The year-over-year growth for the third quarter builds on the strong performance delivered in the first half of the year. This new period of growth is driven by our strategic focus on STEM and flexible working, through independent and salaried entrepreneurs,” added Lehne.

“Good progress has also been made in executing our broader strategy, with investment in our people, talent acquisition and digital infrastructure progressing as planned. This investment is designed to support our long-term success, with costs beginning to be incurred in the third quarter, as previously disclosed,” Lehne continued.

Group gross profit reported by SThree was as follows:

(in millions of £) Q3 2022 Q3 2021 Change in constant currency
Contract 86.6 68.8 21%
Permanent 25.2 22.2 ten%
Band 111.8 91.0 19%

Growth at constant exchange rates of 21% outpaced currency growth was the sixth consecutive quarter of double-digit growth. Regionally, DACH (Germany, Austria and Switzerland) grew by 18%, excluding EMEA. DACH grew by 27%, US by 16% and APAC by 41%, at constant exchange rates over the year. The contractors backlog increased by 24%, at constant exchange rates, reflecting the strong demand for qualified contractors that the group has seen in its markets. The contractor’s backlog represents the value of the net fees up to the contract end dates, assuming that all contract hours are worked.

DACH, the largest permanent marketplace, reported net fee growth of 11% year-on-year, in constant currency. excluding EMEA DACH grew 24% year-on-year, US down 10% and APAC up 40%, at constant exchange rates.

Gross profit by country

(in millions of £) Q3 2022 Q3 2021 Change in constant currency
DACH (Germany, Austria and Switzerland) 38.5 33.2 16%
EMEA excluding DACH 40.3 31.7 26%
UNITED STATES 29.3 23.4 9%
APAC 3.7 2.7 40%

In DACH, Germany, which accounts for 88% of DACH net expenses, saw net expense growth of 13%, driven by technology up 21%, with increased demand for roles in infrastructure, cybersecurity, leadership and strategic positions. Engineering is up 13%, due to demand for construction trades, at constant exchange rates. The group recorded growth in Austria of 61% and in Switzerland of 42%, at constant exchange rates.

EMEA excluding DACH increased by 26% at constant exchange rates. The Netherlands, the largest country in the region (47% of net fees), saw net fees up 36%, driven by engineering up 34% with increased demand for process engineers and in electricity. Technology grew by 39%, driven by increased demand for project managers, erp consultants and data scientists, at constant exchange rates.

The strong recent performance in the UK continued with net fee growth of 25% at constant exchange rates. This was driven by technology, up 30% (CC), as demand increased for IT leadership and strategy roles, software developers, software engineers and testing roles.

In the United States, the group recorded strong growth in Contract, up 16% (CC). Ongoing business was down 10% (CC) following the group’s strategic focus on contracts and very strong comparatives to the prior year, when life sciences was the strongest performer due to the particularly high demand for the activity linked to Covid-19. (numbers?) Engineering grew by 37%, with a particular focus on roles in electrical engineering and project management. Technology grew 15% (CC), driven by increased demand for positions within Adobe, Microsoft.Net developers, mobile applications and infrastructure.

Within APAC, Japan, which accounts for 67% of APAC’s net charges, saw its net charges increase by 44% (CC). Growth was driven by technology up 30%, with demand for business analysts, application specialists and infrastructure positions.

Lehne said: “While we remain mindful of macro-economic uncertainty in global markets, with all developments and key group performance indicators closely watched, our strong market position reinforces our confidence in the medium and long-term future of the group.”

The group plans to release a trade update for the year ending November 30, 2022 on December 14, 2022.

As of last trade, SThree shares traded at £364.00, up 4.0% on the day and 16.48% above the 52-week low of £312.50 set on June 16, 2022 The company has a market capitalization of £468.26 million.

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